SAM II ASSET MANAGEMENT PROGRAM

Transcription

1 MARCH 31, 2008 SEC FILE NUMBER SAM II ASSET MANAGEMENT PROGRAM THIS BROCHURE PROVIDES CLIENTS WITH INFORMATION ABOUT LPL FINANCIAL CORPORATION AND THE STRATEGIC ASSET MANAGEMENT II ( SAM II ) PROGRAM THAT SHOULD BE CONSIDERED BEFORE ESTABLISHING A SAM II ACCOUNT. THIS INFORMATION HAS NOT BEEN APPROVED OR VERIFIED BY ANY GOVERNMENTAL AUTHORITY. LPL Financial Corporation - A Registered Investment Advisor One Beacon Street, 22nd Floor, MA (617) TABLE OF CONTENTS INTRODUCTION SERVICES PROVIDED FEE SCHEDULE CONFLICTS OF INTEREST REPORTING CLIENT INFORMATION TYPES OF CLIENTS EDUCATION AND BUSINESS STANDARDS EDUCATION AND BUSINESS BACKGROUND INVESTMENT POLICY COMMITTEE MINIMUM ACCOUNT SIZE REVIEW OF ACCOUNTS OTHER ADVISORY SERVICES FINANCIAL INFORMATION L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r P a g e i

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3 SAM II ASSET MANAGEMENT PROGRAM INTRODUCTION LPL Financial Corporation ( LPL ), formerly Linsco/Private Ledger, is a broker/dealer registered with the Financial Industry Regulatory Authority and the Securities and Exchange Commission pursuant to the Securities Exchange Act of LPL is also an investment advisor registered with the Securities and Exchange Commission pursuant to the Investment Advisers Act of LPL transacts business in mutual funds, stocks, bonds, commodities, options, private and public partnerships, variable annuities, real estate investment trusts, insurance and other investment products. LPL is licensed to operate in all 50 states and has an independent contractor sales force dispersed throughout the United States. LPL is also qualified to sell insurance products in all 50 states, acting as an independent insurance agency. SERVICES PROVIDED The SAM II program offer clients an asset management account in which LPL in its capacity as a registered investment advisor and its investment advisor representatives ( IARs ) direct and manage specified client assets. The SAM II program permits a client to authorize an LPL IAR to purchase and sell on a discretionary basis no load and load waived mutual funds pursuant to investment objectives chosen by the client, to liquidate previously purchased load mutual funds, and to purchase and sell separate accounts within variable annuities. Other securities approved by LPL for investment in the SAM II account, including equities, fixed income, options, hedge funds, managed futures, and structured products may be purchased and sold on a non-discretionary basis. In some cases, the client may provide discretionary authorization to the IAR for equities, fixed income and options. The client may also elect to direct the purchase and sale of no load and load waived mutual funds. The client selects the IAR who will manage the client account. For purposes of this document, the term Mutual Fund includes both investment companies registered under the Investment Company Act of 1940 and other pooled investment vehicles which are not registered. The SAM II program also permits a client to select a third party investment advisor ( Portfolio Manager ), other than an IAR, to direct and manage specified assets for the client. The Portfolio Manager receives a portion of the management fee paid by the client. The portion received by the Portfolio Manager is negotiable, but ranges between.50% and 1.00% and does not result in a higher management fee to the client. In some instances, IARs may be associated persons licensed with an independent third party investment advisor. LPL and IAR may also utilize the services of cash solicitors in establishing client accounts. Each IAR managing a SAM II account chooses his/her own research methods, investment style and management philosophy. The IAR has access to various research reports and model portfolios to which he/she may refer in determining which securities to purchase or sell. Described below are several illustrative categories of management styles which may be utilized by IARs. This is not necessarily an exhaustive list; clients may wish to contact the IAR managing his/her accounts for additional information on the IARs particular approach to managing client accounts. Although these descriptions are written in terms of individual equities and/or bonds, please note that mutual funds whose portfolios consist of the type of equities or bonds referenced are also used extensively. It is also important to note that an IAR may use a combination of management styles. Growth Style - This management style focuses on purchasing the stock of companies that have superior financial characteristics such as above-average sales growth, profit growth, dividend growth, profit margins and return on capital. In general, an IAR following a growth approach to managing is willing to pay a higher than average valuation for this type of stock. L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r P a g e 1

4 SAM II ASSET MANAGEMENT PROGRAM The most volatile type of growth style will follow an earnings momentum approach, which emphasizes companies exhibiting very rapid sales and earnings growth, while paying less attention to the valuation of the stock. A more conservative growth manager may choose to focus on high quality growth companies that are available at reasonable valuations determined by various pricing models. In addition, the growth approach may be applied across the capitalization spectrum so that an IAR may choose to focus on either small-cap or large-cap stocks. Value Style - This management style focuses on purchasing the stock of companies that generally have less attractive measures of financial performance than growth companies, but can be purchased at very attractive prices. In other words, a lower quality stock is acceptable as long as the price is sufficiently attractive. An IAR following a value approach to managing may choose to invest in the stock of companies that he/she feels are selling at a sizeable discount from private market value - a price corporate acquirers might be willing to pay for the entire company. Value managers are also attracted to sound companies whose stock prices are depressed by temporary business problems or investor misperceptions. The value approach may be applied across the capitalization spectrum so that an IAR may choose to focus on either small-cap or large-cap stocks. Fixed Income Style - This management style focuses on purchasing different types of bonds. In particular, an IAR following a fixed income approach to managing invests in high quality bonds, lower quality high yielding bonds, or international bonds, depending on the specific objectives for the account. Asset Allocation Style - This management style strives to construct portfolios which provide a certain level of overall risk (or fluctuation in principal) than would otherwise have been achieved through a less diversified approach. To achieve this objective, the IAR may combine asset classes whose returns do not move in perfect tandem; in other words, their returns are not closely correlated. FEE SCHEDULE The annual management fee ( Account Fee ) schedule for the SAM II account is described below. PORTFOLIO VALUE MAXIMUM FEE $25, % The Account Fee is negotiable and is payable quarterly in advance. For purposes of calculating Account Fees and providing performance reports, the account quarter begins on the first day of the month in which the account is accepted by LPL. The initial Account Fee is due at the beginning of the quarter following execution of the SAM II Client Agreement and includes a prorated fee for the initial quarter in addition to the standard quarterly fee for the upcoming quarter. Subsequent Account Fee payments are due and assessed at the beginning of each quarter based on the value of the assets under management as of the close of business on the last business day of the preceding quarter as valued by an independent pricing service, where available, or otherwise in good faith as reflected on client s quarterly portfolio evaluation report. Additional deposits and withdrawals will be added or subtracted from portfolio assets, as the case may be, which may lead to an adjustment of the advisory fee. All Account Fees are deducted from the account pursuant to the SAM II Client Agreement unless other arrangements have been made in writing. For Retirement Accounts, the account fee shown above will be reduced by 12b-1 fees paid to LPL by mutual funds which are held in the account. The reduction will appear as an offset against the Account Fee assessed on your quarterly SAM II statement. The reduction will be net of the LPL IRA maintenance fee. The fee offset will be paid quarterly based on the three month average P a g e 2 L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r

5 SAM II ASSET MANAGEMENT PROGRAM balance of mutual funds in your account which pay 12b-1 fees. The fee offset may not exceed the Account Fee in any given quarterly period. No portion of the 12b-1 fees for Retirement Accounts may be utilized for the benefit of LPL or the IAR. Accounts with assets valued at less than $100,000 at the end of the quarter will be assessed an additional $ Accounts with hedge funds and managed futures will be assessed an annual Alternative Investment Administrative fee of $35.00 per position, subject to a maximum of $ per account per year. Although expressed as a percentage, in certain situations where agreed to by the client, the Account Fee may be calculated as a flat fee for the first annual period. One fourth of the annual fee will be assessed to the account on a quarterly basis in advance. The amount of the flat fee will be adjusted annually thereafter based on the stated percentage. The Transaction Charges are: MUTUAL FUNDS PURCHASE OR LIQUIDATION NO CHARGE TO CLIENT SYSTEMATIC PURCHASES AND REDEMPTIONS (ONLY CERTAIN FUNDS ARE ELIGIBLE) NO CHARGE TO CLIENT EXCHANGES (ONLY CERTAIN FUNDS ARE ELIGIBLE) NO CHARGE TO CLIENT WIRE PURCHASE AND REDEMPTION FEES (IF APPLICABLE) VARIES FIXED INCOME PURCHASE OR LIQUIDATION NO CHARGE TO CLIENT UIT LIQUIDATION NO CHARGE TO CLIENT EQUITIES AND OPTIONS PURCHASE OR LIQUIDATION NO CHARGE TO CLIENT SAM II Account Fees are negotiable. The Account Fee is paid to and retained by LPL and the IAR. In addition to the Account Fees and Transaction Charges (if applicable) noted previously, Client may also incur certain charges imposed by third parties or LPL in connection with investments made through Program accounts. These may include, but are not limited to, the following: mutual fund or money market 12b-1, subtransfer agent fees, omnibus processing fees and networking fees, mutual fund or money market management fees and administrative expenses, mutual fund transaction fees, certain deferred sales charges on previously purchased mutual funds transferred into the account, annuity expenses, other transaction charges and service fees, IRA and qualified retirement plan fees, administrative servicing fees for trust accounts, creation and development fees or similar fees imposed by unit investment trust sponsors, hedge fund investment management fees, managed futures investor servicing fees, participation fees from Auction Rate Preferred securities and other charges required by law. LPL and IAR may receive a portion of these fees. Further information regarding charges and fees assessed by a mutual fund or the variable annuity are available in the appropriate prospectus. Mutual funds may also charge a redemption fee if a redemption is made within a specific time period following the investment. The terms of any redemption fee are disclosed in the fund s prospectus. LPL serves as a sub-services agent with respect to the Optimum Funds, which are available in a Program account. As such, LPL L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r P a g e 3

6 SAM II ASSET MANAGEMENT PROGRAM will provide all sub-accounting and shareholder recordkeeping with respect to Optimum Fund shares, and will provide the following administrative services among others: 1) establishing and maintaining sub-account records reflecting the issuance, transfer or redemption of shares, 2) assisting shareholders in designating and changing account designations and addresses, and 3) responding to inquiries for shareholders with respect to the status of sub-accounts, fund performance, sub-account histories and making adjustments to sub-accounts to correct sub-account files. As compensation for these services, LPL receives administrative servicing fees from the service agent of the Optimum Funds. LPL provides investment consulting services to the advisor to the Optimum Funds including, but not limited to: 1) assist the advisor in determining whether to employ, maintain or terminate sub-advisors for the Optimum Funds, 2) provide quarterly fact sheets describing the performance of the Optimum Funds, 3) provide quarterly analysis consisting of statistical information and analysis regarding the Optimum Funds and sub-advisor performance, 4) meet with sub-advisors selected by the advisor to the Optimum Funds to discuss their performance and prepare reports regarding their evaluations, and 5) help the advisor make recommendations on sub-advisors to the Board of Trustees by providing the advisor to the Optimum Funds with potential sub-advisor options. As compensation for these services, LPL receives investment consulting compensation from the advisor to the Optimum Funds. In addition, client should be aware that hedge funds and managed futures products share a portion of the investment management fee charged by the hedge fund and managed futures with LPL. A portion of this compensation is retained by LPL and a portion of this compensation is paid to IAR. The amount of the investment management fee is described in the prospectus for the hedge fund or managed futures. If an account is approved for trading on margin and the client has entered into a margin agreement with LPL, the client will be charged margin interest on any credit extended to or maintained by the client. For performance illustration purposes, the margin interest charge will be treated as a withdrawal and will, therefore, not negatively impact the performance figures reflected on the quarterly advisory reports. LPL will retain a portion of any interest charged on margin debit balances. This interest charge is in addition to the annual investment advisory fee charged in connection with the SAM II account. The annual investment advisory fee will not be charged on any margin debit balance, rather only on the net equity of the account. Client should be aware that margin borrowing involves additional risks. Margin borrowing will result in increased gain if the value of the securities in the account go up, but will result in increased losses if the value of the securities in the account go down. LPL, acting as the client s creditor, will have the authority to liquidate all or part of the account to repay any portion of the margin loan, even if the timing would be disadvantageous to the client. Certain mutual funds available in the SAM II account invest primarily in alternative investments. Investing in alternative investments may not be suitable for all investors and involves special risks, such as risks associated with leverage, selling securities short, the use of derivatives, potential adverse market forces, regulatory changes and potential illiquidity. There are special risks associated with mutual funds that invest principally in real estate securities, such as sensitivity to changes in real estate values and interest rates and price volatility because of the fund s concentration in the real estate industry. P a g e 4 L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r

7 SAM II ASSET MANAGEMENT PROGRAM Hedge funds are available for purchase in the SAM II account by clients meeting certain qualification standards. Investing in hedge funds involves additional risks including, but not limited to, the risk of investment loss due to the use of leveraging and other speculative investment practices and the lack of liquidity. In addition, hedge funds are not required to provide periodic pricing or valuation information to investors and may involve complex tax structures and delays in distributing important tax information. Managed futures are available for purchase in the SAM II account by clients meeting certain qualification standards. Investing in managed futures involves additional risks including, but not limited to, the risk of investment loss due to the use of leveraging and other speculative investment practices, the lack of liquidity and performance volatility. Structured products are available for purchase in the SAM II account. Structured products are securities derived from another asset, such as a security or a basket of securities, an index, a commodity, a debt issuance, or a foreign currency. Investing in structured products involves additional risks. Some structured products offer full protection of the principal invested, others offer only partial or no protection. Structured products frequently limit the upside participation in the reference asset. CONFLICTS OF INTEREST The Account Fee and the quarterly charge for accounts with assets valued at less than $100,000 represents compensation for asset management and reporting services. A portion of the 12b-1 fees may be reallowed to IAR to lower the administrative charges assessed to IAR by LPL. LPL is appointed by client as the sole and exclusive broker/dealer with respect to processing securities transactions for SAM II client accounts. Securities transactions for SAM II accounts are effected through LPL without commissions being paid to LPL. While LPL makes every attempt to obtain the best execution possible, there is no assurance that it will be obtained. Clients should consider whether or not the appointment of LPL as the sole broker/dealer may or may not result in certain costs or disadvantages to the client as a result of possibly less favorable executions. In considering whether or not to restrict the execution of transactions through LPL, LPL considered its capabilities to execute, clear and settle transactions. Although Client will not be charged a Transaction Charge for transactions, Client should be aware that IAR will be required to pay Transaction Charges. No agency cross transactions or principal transactions may be effected in SAM II accounts. LPL may aggregate transactions for a client with other clients to improve the quality of execution. When transactions are so aggregated, the actual prices applicable to the aggregated transactions will be averaged, and the client account will be deemed to have purchased or sold its proportionate share of the securities involved at the average price obtained. For orders that are only partially filled in client accounts, the Trading Department works with the IAR to determine an appropriate breakdown. If you have a non-retirement (and otherwise eligible) account, up to $1 million ($2 million if your account is held jointly) of your cash balance will be automatically invested in an interest-bearing Federal Deposit Insurance Corporation ( FDIC ) -insured deposit account (an Insured Cash Account or ICA ) (cash above this amount will be deposited in a money market account L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r P a g e 5

8 SAM II ASSET MANAGEMENT PROGRAM designated by LPL or in one bank participating in the ICA program). LPL receives a fee equal to a percentage of the average daily deposit balance in your Insured Cash Account. The fee paid to LPL may be at an annual rate of up to an average of 200 basis points as applied across all deposit accounts taken in the aggregate. If you do not want to have your cash balance automatically invested in an ICA, you may speak to your IAR to have your cash balance automatically invested in a tax exempt money market fund if you meet the account minimum, or purchase a money market fund as an investment and not automatically as a sweep investment. Activity with respect to your Insured Cash Account will appear on your account statement. For each statement period, your account statement will reflect deposits to and withdrawals from your Insured Cash Account, the closing balance of the Insured Cash Account at each Bank at which your funds are held, and the interest earned on Insured Cash Account balances. For additional information on your Insured Cash Account, please see the ICA information brochure available from your IAR. If you have a retirement (or non-retirement but ineligible) account, your cash balance will continue to be invested in a money market fund. The money market fund utilized in the SAM II Asset Management Program may pay 12b-1 fees higher than other money market funds. LPL may receive compensation of up to 0.15 percent of the assets invested in a money market fund in connection with our marketing support programs. The IAR does not receive any portion of this payment. The IAR may receive additional cash or non-cash compensation from advisory product sponsors. Such compensation may not be tied to the sales of any products. Compensation may include such items as gifts valued at less than $100 annually, an occasional dinner or ticket to a sporting event, or reimbursement in connection with educational meetings. Client should be aware that certain mutual funds, including the Eaton Vance Senior Floating Rate Fund, available within the SAM II program are not readily marketable. In an effort to provide investor liquidity, the mutual funds may offer to repurchase a certain percentage of shares at net asset value on a periodic basis. Thus, clients may be unable to liquidate all or a portion of their shares in these types of mutual funds. Client should be aware that hedge funds and managed futures are not liquid as there is no secondary trading market available. At the absolute discretion of the issuer of the hedge fund or managed futures, there may be certain repurchase offers made from time to time. However, there is no guarantee that client will be able to redeem the hedge fund or managed futures during the repurchase offer. Client should be aware that structured products, which have a fixed maturity, are not liquid. Although some structured products may be listed on an exchange, even those structured products may be very thinly traded. LPL has an arrangement with Independent Advisers Group ( IAG ), a registered investment advisor. LPL and IAG are related persons as defined by Form ADV. LPL has been retained by IAG to provide research and model portfolio management services for certain accounts offered through IAG. LPL has an agreement with UVEST Financial Services Group, Inc. ( UVEST ), a registered broker-dealer and registered investment advisor. Under this agreement, UVEST registered representatives that are licensed as investment advisor representatives of LPL are authorized to offer LPL advisory programs to clients. UVEST and LPL are related persons as defined by Form ADV. P a g e 6 L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r

9 SAM II ASSET MANAGEMENT PROGRAM LPL may also enter into agreements with other related persons as defined by Form ADV that are registered investment advisors and/or registered broker/dealers, including Mutual Service Corporation, Associated Securities Corp., Associated Planners Investment Advisory, Inc., Waterstone Financial Group, Inc. and IFMG Securities, Inc., pursuant to which these related firms and their representatives would be authorized by LPL to offer the SAM II program to clients. LPL and The Private Trust Company ( PTC ), a federally chartered non-depository bank licensed to provide trust services in all 50 states, are related persons as defined by Form ADV. PTC provides personal trustee services to IARs and their clients for a variety of administrative fiduciary services. The SAM II program may cost the client more or less than purchasing program services separately. Factors that bear upon the cost of the SAM II account in relation to the cost of the same services purchased separately include: the type and size of the account, the historical and or expected size or number of trades for the account, the percentage of Participating Funds held in the account, and the number and range of supplementary advisory and client related services provided to the account. The Account Fee is an ongoing fee for investment advisory services and may cost the client more than if the assets were held in a traditional brokerage account. In a brokerage account, a client is charged a commission for each transaction, and the representative has no duty to provide ongoing advice with respect to the account. If the client plans to follow a buy and hold strategy for the account or does not wish to purchase ongoing investment advice or management services, the client should consider opening a brokerage account rather than a SAM II account. The IAR recommending the SAM II program to the client receives compensation as a result of the client s participation in the program. The amount of this compensation may be more or less than what the IAR would receive if the client participated in other LPL programs or paid separately for investment advice, brokerage, and other client services. Therefore, the IAR may or may not have a financial incentive to recommend SAM II over other programs and services. REPORTING The client receives from LPL detailed quarterly performance reports describing account performance and positions. An additional year-end report is provided for accounts not established on a calendar quarter basis. In addition to the quarterly performance reports, LPL transmits to clients trade confirmations and account statements showing all transactions, positions, and all deposits and withdrawals of principal and income. Trade confirmations are not delivered for systematic purchases, systematic redemptions and systematic exchanges. The account statements are sent monthly when the account has had activity or quarterly if there has been no activity. Trade confirmations and account statements for the variable annuity, hedge funds, and managed futures are provided directly by the sponsor. Performance information is reviewed for accuracy by the Advisory Services Operations department at LPL. The review process consists of pricing all positions, reconciling account positions, automatically updating performance records and checking each account s performance for deviations from other accounts. Performance information is calculated on a uniform and consistent basis using a time-weighted rate of return. L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r P a g e 7

10 SAM II ASSET MANAGEMENT PROGRAM CLIENT INFORMATION The IAR obtains the necessary financial data from his/her client and assists the client in setting appropriate investment objectives for the program account. The IAR obtains this information by having the client complete a Confidential Client Profile which is a part of the SAM II Client Agreement. The IAR is obligated to ask the client from time to time whether or not information in his/her Confidential Client Profile has changed so that updated information can be obtained when needed. TYPES OF CLIENTS The SAM II program is available for individuals, banks and thrift institutions, pension and profit sharing plans, trusts, estates, charitable organizations, state and municipal government entities, corporations and other business entities. EDUCATION AND BUSINESS STANDARDS LPL generally requires that individuals involved in determining or giving investment advice have at least two years financial planning, advisory or brokerage related experience. Each IAR is also required to possess a FINRA Series 6, 7, 65, or 66 license. EDUCATION AND BUSINESS BACKGROUND The education and business background for the preceding five years of key management personnel involved with investment advisory services are as follows: MARK S. CASADY, born September 21, 1960; Indiana University, BS; DePaul University, MBA; Managing Director- Americas at Zurich Scudder Investments, Inc. from 1994 to 2002; Chief Operating Officer of LPL from May 2002 to June 2004; President of LPL from 2003 to March 2007; Director of LPL from August 2004 to present; Interim CEO of LPL from August 2004 to December 2004; CEO of LPL from December 2004 to present; Chairman of LPL from January 2006 to present. BILL MAHER, born May 19, 1961; Rutgers University, B.A.; Rutgers Graduate School of Management, MBA; Chief Financial Officer and Managing Director of Nicholas Applegate Capital Management from 1999 to 2005; Executive Vice President and Chief Financial Officer of LPL from April 2005 to December 2005; Managing Director and Chief Financial Officer of LPL from January 2006 to present; Director of LPL from February 2006 to present. ESTHER M. STEARNS, born June 11, 1960; University of Chicago, BA; Chief Information Officer of LPL from 1996 to 1998; Managing Director and Chief Information Officer of LPL from 1998 to June 2004; Chief Financial Officer of LPL from December 2004 to April 2005; Chief Operating Officer of LPL from June 2004 to present; Director of LPL from February 2006 to present; President of LPL from March 2007 to present. LINCOLN ANDERSON, born April 24, 1951; University of Wyoming, BA; UCLA, MA; Director of Economic and Sector Research at Fidelity Investments from 1990 to 1998; Chief Investment Officer of LPL from 1999 to 2000; Managing Director and Chief Investment Officer of LPL from 2000 to present. STEVEN M. BLACK, born December 19, 1956; Stockton State College; Vice President of Operations in the Bank of America Capital Market Operations Department at BA Investment Services, Inc. from 1991 to 1998; Senior Vice President of LPL from P a g e 8 L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r

11 SAM II ASSET MANAGEMENT PROGRAM 1998 to 2001; Managing Director of Operations and Trading of LPL from 2001 to May 2006; Managing Director and Chief Risk Officer of LPL from May 2006 to present. STEPHANIE L. BROWN, born February 1, 1953; Bryn Mawr College, BA; Catholic University of America, JD; Managing Director of Compliance and General Counsel of LPL from 1991 to March 2004; Managing Director and General Counsel of LPL from March 2004 to present. WILLIAM E. DWYER III, born December 5, 1957; Boston College, BA; Vice President of LPL from 1992 to 1997; Senior Vice President of LPL from 1998 to 2001; Executive Director, Branch Development of LPL from 2002 to 2003; Managing Director, Branch Development of LPL from 2004 to July 2005; Managing Director, National Sales of LPL from July 2005 to present. JONATHAN EATON, born February 14, 1959; University of Maine, BA; Executive Vice President, Product Marketing of LPL from 2004 to 2006; Executive Vice President, Head of Institutional Business Services of LPL from January 2007 to July 2007; Executive Vice President, Head of National Sales, Custom Clearing Services August 2007 to December 2007; Managing Director, Custom Clearing Services of LPL from January 2008 to present. CHRISTOPHER F. FEENEY, born December 3, 1955; State University of New York, Oneonta, BA; President and COO of Multex, Inc. from April 2000 to March 2003; CEO of Telerate, Inc. from July 2003 to December 2004; Managing Director of Wealth Management at Thomson Financial from December 2005 to November 2007; Managing Director and Chief Information Officer of LPL from January 2008 to present. DONNA NAUSS, born February 14, 1961; San Diego State University, BS; University of San Diego, MBA; Vice President at LPL from 1992 to September 2004; Vice President and Chief Compliance Officer - Advisory at LPL from October 2004 to January 2006; Senior Vice President and Chief Compliance Officer - Advisory of LPL from January 2006 to present. JOSEPH P. TUORTO, born October 26, 1957; University of South Florida, BA; University of Tampa, MBA; Senior Vice President and Chief Compliance Officer of Raymond James and Associates, Inc. from 1987 to 2004; Senior Vice President and Head of Compliance of LPL from March 2004 to June 2004; Executive Vice President and Head of Compliance of LPL from July 2004 to December 2004; Executive Vice President and Chief Compliance Officer - Brokerage of LPL from December 2004 to December 2005; Managing Director and Chief Compliance Officer - Brokerage of LPL from January 2006 to July 2007; Managing Director, Independent Advisor Services of LPL from July 2007 to present. KEVIN HOGAN, born May 23, 1954; Southern Illinois University; Chief Marketing Officer, Investment Products at CNA from 1995 to 2001; Senior Vice President, Annuity Product Marketing at Scudder Investments from 2001 to 2004; Senior Vice President, Insurance and Annuity Product Marketing of LPL from 2004 to 2006; Senior Vice President, Product Development of LPL from 2007 to present. LEON LEE, born September 3, 1959; University of California at Berkeley, BA; Vice President, Operations of LPL from 1999 to 2001; Senior Vice President, Operations of LPL from 2001 to 2004; Executive Vice President, Advisor Services Operations of L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r P a g e 9

12 SAM II ASSET MANAGEMENT PROGRAM LPL from 2004 to 2006; Managing Director, Advisor Services Operations of LPL from January 2007 to December 2007; Managing Director, Broker/Dealer Support Services of LPL from January 2008 to present. MARK J. SCHLAFLY, born January 3, 1961; St. Louis University, BS; Vice President and Manager, Investment Products at A.G. Edwards from 2000 to 2006; Senior Vice President, Corporate Sponsor Relations of LPL from November 2006 to present. G. BURTON WHITE, born April 18, 1969; College of William and Mary, BBA; Research Liaison at Thompson, Siegel and Walmsley from 1991 to 1995; Investment Analyst at Mercer Investment Consulting from 1995 to 1998; Senior Vice President and Director of Mutual Fund Investments at Wheat First (later to become Wachovia Securities) from 1998 to 2000; Managing Director and Director of Research at Wachovia Securities from 2000 to 2007; Managing Director and Director of Research of LPL from November 2007 to present. DANIEL ARNOLD, JR., born January 31, 1964; Auburn University, BS; Georgia State University, MBA; CEO and President of UVEST Financial Services Group, Inc. from 1996 to present; Managing Director, President of Financial Institution Services of LPL from August 2007 to present. DENISE ABOOD, born October 7, 1961; Wittenberg University, BA; CFO of UVEST Financial Services Group, Inc. from January 2004 to January 2007; Executive Vice President, Human Capital of LPL from January 2007 to December 2007; Managing Director, Human Capital of LPL from January 2008 to present. INVESTMENT POLICY COMMITTEE The LPL Investment Policy Committee is responsible for oversight of LPL s investment selection process, and for reviewing and approving certain products to be offered in the SAM II account, including, but not limited to, alternative investments. The members of the Investment Policy Committee are G. Burton White, Steven Black, Stephanie Brown, Leon Lee, Kevin Hogan, Mark Schlafly, William Dwyer, and Joseph Tuorto. MINIMUM ACCOUNT SIZE A minimum account value of $25,000 is required for SAM II. In certain instances, the minimum account size may be lowered. REVIEW OF ACCOUNTS LPL reviews client accounts using exception reports. Certain exceptions are reviewed by members of the Advisory Compliance Department on a quarterly basis. LPL has not assigned a fixed number of exceptions to members of the Advisory Compliance Department. Members of the Advisory Compliance Department are expected to participate in the reviews as needed. IARs also review monthly or quarterly accounts statements as well as quarterly performance reports, copies of which are also provided to the client. The number of client accounts handled by each IAR varies. OTHER ADVISORY SERVICES LPL also sponsors various other wrap fee programs. To receive a copy of a similar brochure for any of the other wrap fee programs for which LPL is a sponsor, please contact your IAR. P a g e 1 0 L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r

13 SAM II ASSET MANAGEMENT PROGRAM The SAM II program may be offered to clients through a third party investment advisor and its representatives, rather than through an LPL IAR. A similar brochure particular to the program as offered through the third party investment advisor may be provided to clients of the third party advisor. To receive a copy of such a brochure, please contact LPL or the third party advisor. LPL representatives may also be registered separately from LPL as investment advisors. In certain circumstances, depending on the type of services offered, LPL may receive a portion of the fee paid by the client as compensation for LPL s services in overseeing and administering accounts. L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r P a g e 1 1

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17 L P L F I N A N C I A L C O R P O R A T I O N A R e g i s t e r e d I n v e s t m e n t A d v i s o r P a g e 1 5

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